A large literature emphasizes that distortions misallocate resources across firms and are a key source of productivity losses. This paper examines the dynamic effects of distortions when they affect not only the allocation of resources but also firm-level incentives to improve productivity. I...

Plant-level innovation is introduced into an heterogeneous plant setting so that productivity dynamics are endogenous. When policy distortions are positively correlated with plant productivity, I argue that accounting for plant innovation is important for understanding TFP differences across...

This paper evaluates the importance of innovation spending for understanding Canada-U.S. firm size and productivity differences. A standard model of heterogenous producers, amended to include a channel for innovation, is calibrated to the U.S. to serve as a benchmark. Canadian specific features...